10 Tax Tips for the Self-Employed

As a self-employed person, do you ever envy your employed friends at tax time?

Having your own business definitely increases the amount of recordkeeping you have to do for tax purposes. When you’re digging through boxes of business receipts, it’s easy to envy people who only have to enter income from a W-2 form.

However, as a self-employed person, you get some tax breaks that your employed friends don’t.

For example, employees can deduct certain expenses, but only after they exceed 2% of adjusted gross income.

You can deduct business expenses right off the top – and the expenses even reduce your social security and Medicare tax, which you pay in the form of self-employment tax.

These tips can make tax time less painful and help you take advantage of some of the tax benefits of working for yourself:

1. Make the most of medical insurance deductions

You can deduct health insurance premiums for yourself, your spouse, and your dependents as an adjustment to income.

This includes premiums for long-term care insurance. The policy does not need to be in the business name – it’s deductible even if it’s in your name.

2. Keep the form of your company simple

Unless you need to form a partnership or a corporation for some reason, stick with a Schedule C, Sole Proprietorship. It’s the simplest way to file, and there’s nothing you have to disband if you move on to something else.

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About Sally Herigstad

Sally Herigstad is a certified public accountant and personal finance columnist and author of Help! I Can't Pay My Bills, Surviving a Financial Crisis (St. Martin's Griffin). She writes regularly at CreditCards.com, Bankrate.com, Interest.com, RedPlum, and MSN Money. She is an experienced speaker and a member of Toastmasters International. Follow Sally on Twitter.